Hundreds rush Bankruptcy Court to beat deadline

More Hawaii residents filed yesterday than in all of October 2004

More than 1,000 Hawaii residents seeking protection from credit card companies and other creditors have flocked to U.S. Bankruptcy Court in Honolulu in the past two weeks to beat a deadline tomorrow night, after which it will be harder for people to wipe out their debts by filing for bankruptcy.

New filings were pouring into the bankruptcy court at such an extraordinary rate yesterday that it was nearly impossible to gather a precise number of cases filed. By early evening, 303 people had filed bankruptcy yesterday, which was more than the 278 bankruptcies filed in all of October 2004.

In the first two weeks of October, more than 1,186 people in Hawaii had filed for bankruptcy protection as of yesterday evening, and court officials were expecting more cases to roll in this weekend as attorneys file their petitions via the court's electronic system. Anticipating last-minute filings, the court posted a warning yesterday for lawyers not to wait until the last minute tomorrow night to file their petitions.

The new law will make it harder for people to file for so-called Chapter 7 bankruptcy protection, which allows people to liquidate their assets and essentially walk away from debts. Under the new law, many people will have to file for Chapter 13 bankruptcy, which requires them to set up plans to pay creditors over time.

About 95 percent of the bankruptcy petitions filed this month were Chapter 7 petitions.

Among those rushing to beat the deadline was Arild Christensen of Honolulu, who said he had racked up about $40,000 in credit card debt. A retired movie industry worker who suffers from manic episodes, Christensen said he had gotten into debt after he went on a manic buying binge. At first, Christensen said, he had kept up with his payments. But he said he ran into cash-flow problems because of a bank error, which put him into a hole with escalating debts and no option but to seek the court's relief.

Christensen's assets consist mainly of the fruits of his shopping spree: a huge collection of classic films on DVD from Wal-Mart and a library of books on UFOs and the historical Jesus.

"If the government wants to take it all, they can," he said. "I don't think it's worth a whole lot."

Indeed, Christensen said most of his debt is from interest that he owes and not the money he spent on merchandise. In any event, Christensen said he takes some comfort in knowing he is just one of more than 1,000 people who have filed for protection in Hawaii this month.

"That makes me feel that I'm not the only one they can point to and say I'm screwing the system," he said.

A perusal of a half-dozen cases filed in the rush to court shows people with a variety of jobs and income levels, including an engineer who earns more than $8,000 a month and a movie producer/writer/director who had assets of nearly $500,000. The one constant appeared to be big credit card debts -- more than $100,000 in the case of the engineer.

Dawn Smith, a Honolulu bankruptcy lawyer, said it is common for people with good credit to get in debt slightly over their heads, then find themselves rapidly sinking as the credit card companies ratchet up interest rates to penalize late payments.

"People are late once, and that's when (credit card companies) up their interest rates," Smith said. "It's like it gets worse and worse for people who are trying to keep up with their payments, and then it gets impossible."

Smith said she had filed about 200 petitions in the last 10 days for people trying to beat the deadline.

"Let's put it this way: Everybody's running," said Greg Nishioka, a Honolulu lawyer. Nishioka said he normally does general civil litigation and maybe one or two bankruptcy cases a month. This month, he said, he has filed about a dozen bankruptcy cases.

"We've had an amazing amount of people trying to file before this law changes, and we're trying to help as many people as we can," said Caty Gonzales, a lawyer with the Law Offices of Blake Goodman in Honolulu.

Although her firm is helping two or three times as many people as it normally does in a given period, Gonzales said the firm is still having to turn people away until next week, after the law changes.

Gonzales said she hopes the new law does not make it impossible for people who have no other choice but to walk away from their debts.

"Sadly, what America is geared toward is credit," she said, "and sometimes it just gets out of control."